Leave Compensation Payment 12.5% Calculator NZ

Proposed law, not in force The Employment Leave Bill passed its first reading in March 2026 and the Select Committee reported back on 13 July 2026. It has remaining parliamentary stages to complete, and once it receives royal assent there is a 24 month implementation period before it applies, which points to 2028. The 12.5 per cent rate may change before then. Casual holiday pay is currently 8 per cent under the Holidays Act 2003.
Updated  Employment Leave Bill as reported back by the Education and Workforce Committee, 13 July 2026.
Quick answer On 25 casual hours a week at $28.00 an hour, the leave compensation payment at 12.5 per cent is $87.50 a week, or $4,550.00 a year. The current 8 per cent holiday pay on the same hours would be $56.00 a week, so the proposal is $31.50 a week better in cash. The extra covers sick leave, which those hours would no longer accrue.

Casual work has always been paid differently, because leave that accrues over time does not fit hours that arrive unpredictably. The current answer is 8 per cent holiday pay added to each pay, which represents four weeks of annual leave as a share of a working year. The Employment Leave Bill proposes replacing that with a leave compensation payment of 12.5 per cent on casual and additional hours, and the higher figure is not generosity for its own sake. Under the Bill both annual leave and sick leave accrue on ordinary hours, so hours paid out this way are giving up two entitlements rather than one. The 8 per cent buys out annual leave; the 12.5 per cent buys out annual leave and sick leave together. This calculator prices the payment for any pattern of casual or additional hours and shows exactly what the difference against the current rate is worth.

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Leave compensation payment
$87.50
per week, on top of the hours
Annualised
$4,550.00
if the pattern repeats all year
Better than 8% by
$31.50
per week, or $1,638.00 a year

The two systems side by side

Hours in the period25
Hourly rate$28.00
Gross pay for these hours$700.00
Proposed leave compensation at 12.5%$87.50
Current holiday pay at 8%$56.00
Difference per period$31.50
Total pay under the proposal$787.50
Total pay under the current rules$756.00
Annualised leave compensation$4,550.00
Annualised difference$1,638.00
Of the 12.5%, the sick leave share4.5 percentage points

What the payment is worth at different hours

At your hourly rate, per pay period.

HoursGross payAt 12.5%At 8%Difference
These are gross, indicative figures under a Bill that is not law. They are not financial, tax or employment law advice. The leave compensation payment is taxable in the same way as the wages it accompanies. Whether particular hours count as casual or additional, rather than standard, depends on your employment agreement and how the legislation defines those terms. Your entitlements today are governed by the Holidays Act 2003. Check your position with your employer or Employment New Zealand.

Where 8 per cent came from, and why it is not enough under the new system

Four weeks of annual leave out of a 52 week year is roughly one part in twelve and a half, which is 8 per cent. That is the whole derivation, and it is why the figure has been stable for so long. It buys out annual leave and only annual leave, because under the Holidays Act sick leave is a fixed entitlement of ten days rather than something that accrues per hour, and casual workers who do not meet the eligibility test simply do not get it. Under the Employment Leave Bill sick leave does accrue per hour, from day one, which means hours bought out for cash are now giving up a sick leave accrual as well. A buy-out rate that still only covered annual leave would be short-changing the worker, and 12.5 per cent is the figure that covers both.

More cash is not automatically a better deal

It is worth being clear-eyed about this, because the headline reads as a pay rise for casuals and for some people it will not be. A leave compensation payment converts a future entitlement into money today. If you have irregular work and immediate costs, that is a genuine improvement: money in the pay packet is worth more than an accrual you may never draw on. If you get sick, it is not. Under the current system a casual who becomes eligible has ten days of sick leave to fall back on; under a full buy-out there is no balance at all, only the cash that was paid earlier and probably spent. The right answer depends on the person, which is an uncomfortable thing for legislation to accommodate.

It applies to some of your hours, not all of them

The payment attaches to casual hours and to additional hours worked beyond your standard hours. If you have regular standard hours and occasionally work extra, your standard hours keep accruing leave in the normal way and only the extra attracts the payment. That mixed position is the common case for part-timers picking up shifts, and it means the effective rate across your whole pay is somewhere between the two. This calculator prices only the hours you enter, so enter the casual or additional hours rather than your total.

Worked example

A casual employee works 25 hours in a week at $28.00 an hour, so gross pay for those hours is $700.00. The proposed leave compensation payment at 12.5% is $87.50, giving total pay of $787.50.

Under the current rules the same hours attract 8% holiday pay, which is $56.00, for a total of $756.00. The proposal is $31.50 a week better, or $1,638.00 across a year if the pattern repeats. That extra is the price of the sick leave those hours would otherwise have accrued.

How this is calculated

Gross pay for the period is the hourly rate multiplied by the hours entered. The leave compensation payment is that gross figure multiplied by the rate, 12.5 per cent as proposed. The comparison figure is the same gross multiplied by 8 per cent, which is the current pay-as-you-go holiday pay rate under the Holidays Act 2003. The difference is the gap between the two. Annualised figures multiply by 52 for weekly, 26 for fortnightly and 12 for monthly. The sick leave share shown is the proposed rate less the 8 per cent that represents annual leave alone.

Official sources

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Important: this is information, not legal advice

This page explains how the law works and estimates figures from what you enter. It cannot tell you what will happen in your situation, because employment outcomes turn on facts, evidence and the wording of your own agreement. Nothing here creates a lawyer and client relationship.

It has not been reviewed by a lawyer. The legal descriptions are drawn from Employment New Zealand, MBIE and Inland Revenue and were checked against those sources on 7 August 2026. They are our reading of published guidance, not a practitioner's opinion, and parts of this area are very new: the Employment Relations Amendment Act 2026 has been in force only since 21 February 2026 and there is little case law on how it will be applied.

The Employment Leave Bill is not law. Casual holiday pay remains 8 per cent under the Holidays Act 2003 until it commences.

Before you act, get advice. A community law centre is free. Employment New Zealand provides free information and mediation. An employment lawyer will tell you things no calculator can. Time limits are short and unforgiving: a personal grievance must generally be raised within 90 days, so seek advice early rather than waiting for certainty.

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How to work out the leave compensation payment
  1. Enter your hourly rate. Enter the gross hourly rate paid for the casual or additional hours.
  2. Enter the hours. Enter the casual or additional hours worked in the pay period.
  3. Choose the pay period. Weekly, fortnightly or monthly, so the annualised figure is right.
  4. Read the payment. The leave compensation payment is 12.5 per cent of the gross pay for those hours.
  5. Compare with 8 per cent. The side by side shows the difference against the current pay-as-you-go holiday pay.

Frequently asked questions

What is the leave compensation payment?

It is a proposed upfront payment of 12.5 per cent on casual and additional hours, paid instead of those hours accruing annual and sick leave. It appears in the Employment Leave Bill and would replace the current 8 per cent pay-as-you-go holiday pay arrangement for casual work.

Why is it 12.5 per cent when holiday pay is 8 per cent?

Because it covers more. The 8 per cent figure represents four weeks of annual leave as a proportion of a working year and nothing else. The 12.5 per cent covers annual leave and sick leave together, since under the Bill both accrue on ordinary hours and neither would accrue on hours paid this way. The extra 4.5 percentage points is the sick leave component.

Is the 12.5 per cent leave compensation payment law yet?

No. The Employment Leave Bill passed its first reading in March 2026 and the Select Committee reported back on 13 July 2026, with remaining parliamentary stages still to come and a 24 month implementation period after royal assent. Until it commences, casual holiday pay continues at 8 per cent under the Holidays Act 2003.

Would casual workers be better off?

In cash terms per hour worked, yes, because 12.5 per cent is more than 8 per cent. Whether that is better overall depends on the worker. Money in every pay packet suits someone with irregular work and immediate costs; an accruing sick leave balance suits someone who gets sick. The payment converts an entitlement into cash, which is a real gain for some people and a real loss for others.

Does the payment apply to all my hours?

No, only to casual hours and additional hours worked beyond standard hours. Your standard hours would continue to accrue annual and sick leave in the normal way under the Bill. That is why someone with regular hours plus occasional overtime sees a mixed position rather than one rate across everything.